Bitcoin – Assessing the risk of miners seeing a repeat of 2022’s shutdowns

Bitcoin’s [BTC] short-term holders were forced into the deepest stress phase of the cycle during the recent price drop to $59.1K. At the time, short-term holder whales were facing unrealized losses of $16.4 billion, increasing the risk of capitulation and helping explain the weak market sentiment.

Worth noting though that Bitcoin’s valuation has not hit historical capitulation extremes. Hence, investors should remember that further losses may be possible in the coming months.

Crypto analyst Darkfost highlighted the weak demand in the current market environment. The attached chart showed that Bitcoin ETFs have been facing the deepest drawdown on record.

An estimated $10.5 billion has exited Bitcoin ETFs since 12 October. This reflected the scale of the capital exodus, the analyst wrote.

AMBCrypto had covered the impact of ETF flows on market prices. The report also noted that investors must keep an eye on not just ETF flows, but also on other on-chain metrics to assess crypto asset trends.

The weakening Bitcoin miner position

The 30-day average of the Puell Multiple fell to 0.74, from 0.83 at the end of May. The metric tracks the ratio of miners’ daily revenue to their yearly average value.

The Puell Multiple fell to 0.58, and the decline in its monthly average reflected a compression in daily revenue due to falling prices.

According to analyst Axel Adler Jr, the 0.50 Puell Multiple threshold marked the beginning of massive equipment shutdowns in 2022. The metric was quickly closing in on this threshold.

Miner Capitulation measures the percentage change in the price of Bitcoin since the last drop in network difficulty. Negative readings imply falling prices since the latest difficulty adjustment.

The metric was at -21% at press time, well below the -15% threshold that marks severe pressure on miners. Harsher conditions, signaled by increasingly negative values on the metric above, can also indicate massive equipment shutdowns.

The two miner metrics pointed to increasingly difficult conditions for Bitcoin miners. The severe capital outflows in recent months and the prevailing bearish momentum and market sentiment could worsen the BTC situation too.

Final Summary

• Bitcoin ETFs have been facing the deepest drawdown on record.
• Miner capitulation isn’t here yet, but they are under significant stress and deteriorating conditions could result in mining equipment shutdowns like the 2022 bottom.